U.S. Courts Confirm That Cryptocurrencies Should be Considered Commodities
In a landmark ruling, U.S. Federal Judge Jack Weinstein has ruled that cryptocurrencies are commodities and the law should treat them as such. This supports the assertion of the Commodity Futures Trading Commission (CFTC) that Bitcoin and other cryptocurrencies fall under its jurisdiction.
There has been much speculation and comment about how to classify cryptocurrencies into existing legal frameworks, or if, in fact, they are something entirely new which needs its own legislation. In September 2015 the CFTC said that “Bitcoin and other virtual currencies are a commodity covered by the commodity exchange act”.
Now they have a judge who agrees, setting a legal precedent. “Virtual currencies are ‘goods’ exchanged in a market for a uniform quality and value”, the judge said, so “they fall well within the common definition of ‘commodity’”.
Earlier this year the CFTC brought a case against Coin Drop Markets and its head, Patrick McDonnell, alleging that the company’s customers had not received trading advice that they had paid for, and that the firm was not registered with the CFTC.
The case could only proceed once it was established that the CFTC had any right to police this area, and whether it could “exercise its jurisdiction over fraud that does not directly involve the sale of futures or derivative contracts“. According to Weinstein’s judgement, cryptocurrencies can be considered commodities, and as such the CFTC had the right to impose its regulations on the space.
Last month the heads of American finance’s two most important regulatory bodies, Jay Clayton of the SEC and Christopher Giancarlo of the CFTC, testified in front of the U.S. Senate banking committee. Giancarlo said that he was, “open to exploring with Congress, as well as with our federal and state colleagues, whether increased federal regulation of cryptocurrency trading platforms is necessary or appropriate”.
During the hearing Giancarlo was unexpectedly bullish on cryptocurrencies, vowing to go after fraudulent activity but saying that, “We owe it to this new generation to respect their enthusiasm for virtual currencies, with a thoughtful and balanced response, and not a dismissive one”.
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